The Australian dollar held broadly firm on Wednesday as the prospect of more rate increases at home and rising commodity prices globally pushed it to 11-week highs against the US dollar and a record peak on the euro. The currency was basking in the afterglow from Tuesday's rate hike by the Reserve Bank of Australia (RBA), which took the cash rate to 4.25 percent and even further above the meagre rates on offer in the US and Europe. And there was more to come.
"From our viewpoint it means the cash rate is unlikely to stop even at 5 percent. We see 5.5 percent after mid-2011." One result was that Australian 10-year yields rose to offer a premium of 270 basis points above those in the euro zone, easily the widest spread in over a decade.
That helped the Aussie yet higher on the euro, which fell to a new low of A$1.4400 after sliding a cent on Tuesday. Uncertainty over Greece's fiscal problems also returned after Athens said it does not intend to use the EU-IMF aid mechanism for the time being. The Aussie was strong at $0.9274, after gaining almost a cent overnight. The technical background was supportive after breaking a downward trendline around $0.9253 and it now faces resistance at $0.9300 and the January peak of $0.9331.
Comments
Comments are closed.